RBS sells 918 pubs to Heineken
The deal for the tenanted and leased estate, which is spread across the UK, provides RBS with a clean exit from the portfolio that will continue to be managed by S&NPC.
The Galaxy will now be combined with Heineken UK’s existing portfolio of 462 outlets and will see the company become one of the leading pub owners and operators in the country.
As a result of the sale, the bank received cash proceeds of approximately £422m including approximately £10m of accrued earnings owed to RBS pursuant to the management agreement, which has been terminated with immediate effect.
In the year ended 31 December 2010, Ebitda generated under the terms of the management agreement was £45m. As at 31 December 2010, the business' combined gross asset value was £406m.
The transaction secures the future of S&NPC and will mean no change for tenants, who will continue to be supplied by Heineken.
The provisional fair value of the pubs on Heineken’s balance sheet will be £378m, implying a multiple of 7.2 times based on a trailing 12-month Ebitda of £52.3m for the estate.
The early amortisation and termination of associated contracts under the acquisition is expected to give rise to a one-off, pre-tax P&L expense for Heineken in 2011 of £28m. This will be treated as an exceptional item in the fourth quarter of 2011. Heineken said it expects the acquisition to be earnings accretive from December 2011 and value enhancing in the first year after completion.
Stefan Orlowski, managing director of Heineken UK, said: “There continues to be an important role for the great British pub in the UK on-trade, and this acquisition is a significant vote of confidence in the channel. Owning the Galaxy freehold will allow us to continue the successful transformation of our pub business, concentrate on operational excellence and deliver long-term value from a high-quality, well invested pub estate.”
RBS acquired the pubs from S&N in 2000. A deal struck at the time between RBS and S&N gave the brewer rights to provide property management and beer to the pub estate.
The bank is understood to have been looking to sell the pubs for a number of years. In 2009, it was reported that the pub estate had attracted interest from three property firms and one trade player.
S&N was acquired by Heineken and Carlsberg for £10bn in 2008, with Heineken taking control of the company’s UK operations, while Carlsberg took full ownership of the Russian-based Baltic Beverage Holdings (BBH).
Specialist advisory firm Sapient Corporate Finance advised RBS on the sale of the pubs together with the bank’s corporate finance arm.
Peter Hansen, founder of Sapient Corporate Finance, said: “This is the largest transaction in the tenanted sector since Punch Taverns acquired Pubmaster near the end of 2003 and is a vote of confidence by Heineken in the UK’s pub sector and the on trade.”
In November 2003, Punch agreed to pay £1.2bn for the 3,110-strong Pubmaster business. Four years later, Admiral Taverns acquired 869 tenanted and leased pubs from Punch for £326m.
